The Impact Of Shanghai-hongkong Stock Connect Program On The Shanghai A-share Market

Since the establishment of the Shanghai Stock Market and the Hong Kong Market,China's stock market has gone through more than 20 years,playing a huge role in the risk aversion,margin trading,signal function and so on.The stock market became an important part of the capital market.But the mainland's capital market,including the stock market,always lacks effective communication between foreign market,so it's in a relatively closed state.November 2014,as a new trading mechanism,Shanghai-Hong Kong Stock Connect program strengthen the links between the Shanghai Stock Market and the Hong Kong Market,making the capital in the Mainland and Hong Kong market circulation more smoothly,narrowing the domestic and international gap,it's an important milestone in the opening up of China's capital market.At the same time,due to the cross-market flow of capital,its decentralized risk function can be improved.As a leader in the capital market reform,Shanghai-Hong Kong Stock Connect program shoulder the responsibility of the capital market to the international capital market,so the study of this program has a real significance in The Shanghai A-share market.In order to discuss the impact of Shanghai-Hong Kong Stock Connect program on The Shanghai A-share market,this paper discusses the effects of the policy from the following three aspects by summing up the contents of scholars and making necessary improvements and innovations.So that it can provide some reference for the Shenzhen-Hong Kong Stock Connect program and some suggestions for investors.Firstly,we select The Shanghai A-share daily stock index data from the May 17,2014 to May 17,2015 using ARCH/GARCH model.it's can determine the impact of the rate of return and volatily in The Shanghai A-share market by setting the time dummy variable.The rate of return data using The Shanghai a-share index,measures the average income situation of the A-share market.The volatility data is based on the conditional variance model of the yield,which predicts the variance is defined as the fluctuation.It measures the extent to which the transaction price of the financial asset deviates from the underlying value of the financial asset.It mix up variety of information flow,trading system structure and investor sentiment changes and other factors,but also reflect the uncertainty of the future price of the market,reporting the the market risk.In general,the smaller the volatility,the higher the market operating efficiency,the smaller the market risk.Therefore,when the introduction of a new policy or financial products,countries attach great importance to the volatility in the capital market and the economic,so we choose the volatility as a research goal.Through the empirical analysis of the model,the conclusion is that the implementation of Shanghai-Hong Kong Stock Connect program,making the Shanghai A-share index yield has increased,while the market volatility increased,and the two variables test results are significant.Secondly,we use single stock data of The Shanghai A-share market from the September 17,2014 to January 17,2015,excluding transaction is not continuous.Using difference in differences model,by distinguishing the Shanghai stock shares and non-Shanghai shares through the stock,and setting the time dummy variable,to measure the implementation of Shanghai-Hong Kong Stock Connect program on the Shanghai shares shares and non-Shanghai shares.It can determine the trend of changes in stock return and volatility.Using fixed effect regression and OLS regression make the results more robust.The results show that the return of the Shanghai-Hong Kong Stock has increased,but volatility has been a certain decline,rather than the Shanghai stock,its income is a decline,while its volatility increased.The results passed the robustness test,and it's more significant.Thirdly,we use the AH discount premium index,from the May 17,2014 to May 17,2015 using ARCH/GARCH model,to determine the impact of the Shanghai-Hong Kong Stock Connect program on the AH discount premium.Acoording to the results of empirical tests,the policy makes AH premium premium rise,in other words,A-share premium on H shares increased.And the index volatility and the arbitrage risk between the AH shares will increase.Therefore,the implementation of the policy does have a certain effect on the operation of the AH shares.Through the analysis of the above three aspects of the Shanghai-Hong Kong Stock Connect program,the government should proceed from national conditions,summarize the experiences and lessons,broaden the opinions,speed up the reform and innovation of the financial system,when they regulate the interference of the capital market.So that can we carry out financial policies,which conform our conditions.